SemiLEDs (LEDS) Marked As A Dead Cat Bounce Stock

Trade-Ideas LLC identified SemiLEDs ( LEDS) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified SemiLEDs as such a stock due to the following factors:

LEDS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $13.9 million.

The average volume for SemiLEDs has been 259,300 shares per day over the past 30 days. SemiLEDs has a market cap of $29.5 million and is part of the technology sector and electronics industry. The stock has a beta of 0.66 and a short float of 2% with 0.02 days to cover. Shares are up 87.8% year-to-date as of the close of trading on Friday.

TheStreet Quant Ratings rates SemiLEDs as a sell. Among the areas we feel are negative, one of the most important has been poor profit margins.

Highlights from the ratings report include:

The gross profit margin for SEMILEDS CORP is rather low; currently it is at 16.80%. Regardless of LEDS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, LEDS's net profit margin of -87.07% significantly underperformed when compared to the industry average.

The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, SEMILEDS CORP's return on equity significantly trails that of both the industry average and the S&P 500.

The revenue fell significantly faster than the industry average of 5.7%. Since the same quarter one year prior, revenues fell by 36.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

LEDS's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.17, which illustrates the ability to avoid short-term cash problems.

Investors have driven up the company's shares by 69.16% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the future course of this stock, we feel that the risks involved in investing in LEDS do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.